SNC-Lavalin seeking to restart work in Libya, despite shadow of corruption allegations

MONTREAL • SNC-Lavalin Group Inc. is trying to pick up work again in war-torn Libya, signalling it is ready to move on from corruption allegations that tie the firm to the country’s former dictatorship.

Canada’s corporate image isn’t looking so squeaky-clean in the World Bank’s books — all thanks to SNC-Lavalin.

Out of the more than 250 companies year to date on the World Bank’s running list of firms blacklisted from bidding on its global projects under its fraud and corruption policy, 117 are from Canada — with SNC-Lavalin and its affiliates representing 115 of those entries, the World Bank said.

“With the support of the Canadian embassy in Libya, SNC-Lavalin has maintained contact with the Libyan authorities to resume our projects when the situation will allow,” company spokesperson Lilly Nguyen said in an email, adding the company has local offices there with around 30 employees. “We sincerely hope the best for Libya and the Libyan people, and also hope to be part of their future if we can.”

That the embattled Montreal engineering firm, Canada’s largest, is still interested in Libya isn’t entirely surprising. Former interim chief executive Ian Bourne has said SNC won’t back away from parts of the world where the company has been successful before.

But few places in the world have been as problematic for SNC. From investor lawsuits to police investigations, the company is still grappling today with the fallout of what happened in the country.

“The backlog of this company is shrinking quarter after quarter and that worries me,” said Luc Fournier, who holds SNC stock among $1-billion of Canadian equities he steers at Quebec City-based Industrial Alliance Insurance & Financial Services. “The question is ‘Can they win back business?’ If they have to go further afield to riskier places like Africa to get market share, to get contracts, it scares me a little bit.”

SNC is working on eventually restarting the Benghazi Lakes and Benina Airport projects, Ms. Nguyen said. The lakes project involves the cleanup of three water bodies in Libya’s second-largest city. Benina airport is an estimated $500-million deal to build a new international terminal, runway and apron – also in the city.

SNC has a presence in Libya stretching back more than 40 years. But the company’s recent history in the North African country has been tainted by RCMP allegations that one of its former senior executives, Riadh Ben Aissa, paid $160-million in bribes disguised as consulting fees to Saadi Gaddafi, the playboy son of deposed dictator Col. Muammar Gaddafi, in exchange for steering major contracts in Libya to SNC. An investor class-action lawsuit filed in March 2012 alleges SNC and certain members of its senior management were engaged in “serious, unlawful activities in Libya.”

The claims have not been proven. Mr. Ben Aissa remains in jail in Switzerland awaiting extradition to Canada. Canadian and Swiss police allege he used the Swiss banking system to carry out the kickback scheme while enriching himself in the process.

Mr. Ben Aissa was also allegedly involved in a secret project to smuggle Saadi Gaddafi and his family out of Libya in 2011, in violation of United Nations sanctions. SNC is suing its former executive as well as an Ontario contractor to try to recoup some $1.8-million in that case, claiming it had no knowledge that corporate funds were being used for that purpose.

In part because of the ties Mr. Ben Aissa nurtured with the Gaddafi family, SNC was one of the most active corporate players in Libya. The country was big business for SNC and it won some major contracts, including a piece of the Great Man-Made River project, a massive plan to pump water from super-deep wells in the southern desert to the coastal north.

As recently as 2010, SNC tallied $418-million in annual revenue from work in the nation, representing about 7% of its top line that year. The company was forced to pull out a year later as a six-month uprising turned to civil war. In March 2011, it removed all its new Libya contract bookings and $484-million worth of previously-booked Libyan projects out of its backlog.

They were doing something wrong and they paid their dues

Col. Gaddafi’s autocratic government ended and in 2012, a transitional political council handed power to the country’s newly-elected parliament. Still, insurgent attacks continued.

Today, there remains a heightened risk of terrorism throughout Libya. Meanwhile, as the political situation remains in flux, SNC in August took a second-quarter “risk provision” of $47-million related to a halted project in Libya as a client tried to draw down on a credit line. An analyst at Veritas Investment Research told Bloomberg that SNC’s North African travails proves it’s too soon to recommend investing in the company.

Still, SNC isn’t the first engineering firm to restart operations in an African nation after being implicated in bribery allegations in that same jurisdiction. Tokyo-based JGC Corp., Paris-based Technip SA and British oilfield service company Petrofac have all faced very similar situations, said Dundee Capital Markets analyst Maxim Sytchev.

“At some point they were doing something wrong and they paid their dues most of the time in the local geography and after that they come back. There’s no reason to believe that all of a sudden SNC is going to be any different.”